Wednesday, April 2, 2008

It looks like someone has actually stepped up to catch that 'falling knife' of real estate values we've been hearing about for a couple of years. In a deal announced late Monday by Centex Homes, they're selling 8,500 lots -- many of which are located in hard-hit states such as California and Nevada -- to a joint venture of three capital management firms focused on real estate in order to purge themselves of 10% of their lot holdings and to raise some much-needed capital. From Forbes.com coverage:

Centex Homes, a subsidiary of Centex (nyse: ctx - news - people ), announced late Monday that it will decrease its total lot holding by 10% to reduce its land supply and raise capital. Dallas, Tex.-based Centex will sell 8,500 lots to a joint venture called Corona Land Company which is led by RSF Partners and includes Farallon Capital Management and Greenfield Partners...

Centex said the book value of the properties sold was approximately $528 million, with no more exact figure available. The original cost basis of the land was an estimated $935 million, said Paul Puryear, an analyst from Raymond James. Selling that land for $161 million translates to deep discounting, Puryear said, where Centex got 17 cents on the dollar for its original purchase. That’s not particularly good news for the residential construction and mortgage financing company. But it meets the firm’s near-term goals of freeing up capital and unloading lots and real estate with long lead times...

It’s also a “first step towards rationalization of the marketplace,” Puryear said, adding there are buyers to “catch the falling knife” willing to put money down.